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Heritage Commerce Probability of Financial Distress (%)

: 0.04% (As of Today)
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Probability of Financial Distress (%) measures the probability that a company will go bankrupt in the upcoming year given its current financial position. A higher ratio indicates a larger probability of bankruptcy for the company, while a lower ratio indicates a healthier fundamental. As of today, Heritage Commerce's Probability of Financial Distress (%) is 0.04%.

Like the Altman Z-Score, the PFD measures a company's bankruptcy risk. However, the main drawback of the Z-score is it does not apply to banks and insurance companies. According to Investopedia, the concept of "working capital" does not apply to banks and insurance companies, as financial institutions do not have typical current assets or current liabilities like inventories or accounts payable.


Competitive Comparison

For the Banks - Regional subindustry, Heritage Commerce's Probability of Financial Distress (%), along with its competitors' market caps and Probability of Financial Distress (%) data, can be viewed below:

* Competitive companies are chosen from companies within the same industry, with headquarter located in same country, with closest market capitalization; x-axis shows the market cap, and y-axis shows the term value; the bigger the dot, the larger the market cap. Note that "N/A" values will not show up in the chart.

   

Heritage Commerce Probability of Financial Distress (%) Distribution

For the Banks industry and Financial Services sector, Heritage Commerce's Probability of Financial Distress (%) distribution charts can be found below:

* The bar in red indicates where Heritage Commerce's Probability of Financial Distress (%) falls into.



Heritage Commerce Probability of Financial Distress (%) Calculation

Probability of Financial Distress (%) (PFD) was developed by John Campbell, Jens Hilscher and Jan Szilagyi in their Search of Distress Risk. It measures the probability that a company will go bankrupt within the next 12 months given its current financial position.

The Probability of Financial Distress (%) was obtained by a logit probability model based on eight explanatory variables. The logit formula to compute the probability of financial distress (LPFD) is given below:

LPFD= -20.12 * NIMTAAVG + 1.60 * TLMTA - 7.88 * EXRETAVG + 1.55 * SIGMA - 0.005 * RSIZE - 2.27 * CASHMTA + 0.070 * MB - 0.09 * PRICE -8.87
=-7.84

The Probability of Financial Distress (%) (PFD) was then obtianed by:

PFD=1/(1 + e^(-LPFD))*100%
=0.04%

The eight explanatory variables are:

1. NIMTAAVG = Net Income to Market Total Assets

NIMTAAVG=Net Income / Market Total Assets
=Net Income / (Market Cap + Total Liabilities)

*Note that for companies reported quarterly, geometrically declining weighted quarterly Net Income data in latest four quarters are used.

2. TLMTA = Total liabilities to Market Total Assets

TLMTA=Total Liabilities / Market Total Assets

3. CASHMTA = Cash to Market Total Assets

For banks, CASHMTA is measured as:

CASHMTA=(Cash and cash equivalents + Money Market Investments) / Market Total Assets

4. EXRETAVG = Excess Return compared to the S&P 500

EXRETAVG is the weighted excess return compared to the S&P 500 in past 12 month. Geometrically declining weights are imposed on the monthly excess return to reflect lagged information. The weight is halved each quarter.

5. SIGMA = Standard Deviation of Daily Returns

For sigma, we use the annualized standard deviation of a company's returns over the past 92 days (or 63 trading days).

6. RSIZE = Relative Size

RSIZE=log (Market Cap / Total Market Cap of S&P 500 companies)

7. MB = Market to Adjusted Book Equity Ratio


8. PRICE

PRICE is measured as the log of the stock price, capped at log(15).


Heritage Commerce  (NAS:HTBK) Probability of Financial Distress (%) Explanation

Like the Altman Z-Score, the PFD measures a company's bankruptcy risk in the upcoming year. However, the main drawback of the Z-score is it does not apply to banks and insurance companies. According to Investopedia, the concept of "working capital" does not apply to banks and insurance companies, as financial institutions do not have typical current assets or current liabilities like inventories or accounts payable.


Heritage Commerce Probability of Financial Distress (%) Related Terms

Thank you for viewing the detailed overview of Heritage Commerce's Probability of Financial Distress (%) provided by GuruFocus.com. Please click on the following links to see related term pages.


Heritage Commerce Business Description

Heritage Commerce logo
Industry
Financial Services » Banks NAICS : 522110 SIC : 6022
Traded in Other Exchanges
Address
224 Airport Parkway, San Jose, CA, USA, 95110
Heritage Commerce Corporation operates as a bank holding company. The company, through its subsidiary, offers commercial banking services to small and medium-sized businesses and their owners, managers, and employees. It operates through two segments, namely Banking and Factoring. The bank generates a majority of its revenue from the Banking segment.
Executives
Cabral Bruce H director 150 ALMADEN BOULEVARD SAN JOSE CA 95113
Benito Michael Eugene officer: EVP 150 ALMADNE BLVD. SAN JOSE CA 95113
Moles Robert director HERITAGE COMMERCE CORP 150 ALMADEN BLVD. SAN JOSE CA 95113
Webster Ranson W director C/O HERITAGE BANK OF COMMERCE 150 ALMADEN BLVD SAN JOSE CA 95113
Bisceglia Frank G director C/O HERITAGE COMMERCE CORP 150 ALMADEN BLVD SAN JOSE CA 95113
Jones Robertson Clay Jr officer: EVP 150 ALMADEN BOULEVARD SAN JOSE CA 95113
Wilton Keith director, officer: President and CEO 150 ALMADEN BLVD. SAN JOSE CA 95113
Kaczmarek Walter Theodore director HERITAGE COMMERCE CORP 150 ALMADEN BLVD. SAN JOSE CA 95113
Conner Jack W director HERITAGE COMMERCE CORP 150 ALMADEN BLVD. SAN JOSE CA 95113
Biagini Komas Julianne M director 150 ALMADEN BOULEVARD SAN JOSE CA 95113
Mcgovern Lawrence D officer: EVP/CFO C/O HERITAGE COMMERCE CORP 150 ALMADEN BLVD SAN JOSE CA 95113
Dinapoli Jason Philip director 1875 CENTURY PARK EAST SUITE 1400 LOS ANGELES CA 90067
Roden Laura director 150 ALMADEN BLVD. SAN JOSE CA 95113
Butsch Margo G. officer: EVP/Chief Credit Officer 150 ALMADEN BLVD SAN JOSE CA 95113
Sutton Marina Park director 150 ALMADEN BOULEVARD SAN JOSE CA 95113

Heritage Commerce Headlines

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